Public Policy

Apr

22

Council on State Taxation releases new Business Tax Competitiveness Study

Chaaron Pearson on Friday, April 22, 2011 at 12:00:00 am

This week, the Council on State Taxation (COST) and Ernst & Young announced the release of a new study ranking states by tax burden on new investment. They have provided a state-by-state comparison of the tax liabilities that new investments in selected industries or types of economic activities would incur in each state.

COSTís study identifies the 10 states with the highest and lowest effective tax rates for the types of new capital investments being made in the U.S. The business tax burdens include income and franchise taxes on profits, real and personal property tax and sales taxes on business input purchases. Overall, the study shows a large difference in tax burdens among the states.

In the studyís introduction, COST urges legislators to examine the entire system of state and local business taxes, not just a single tax, in evaluating their stateís tax competitiveness.

COST acknowledges that tax liability on new investments is just one factor of many that weigh into a decision by a company to invest in a state. Typically, companies select locations for new investments by examining a wide range of factors including workforce, property, tax system features and non-tax costs. This study does not consider variable issues such as availability of tax credits or incentives, unemployment taxes or certain industry specific taxes.

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